SECTION 18(6) OF THE CGST ACT READ WITH RULES 40 AND 44

[SOPL SOPL]

Dear Sir

At the time of supply of capital goods on which input tax credit is taken, do we need to comply both the conditions i.e paying tax on transaction value and reversing input tax credit for remaining useful life of the asset (reducing total input by 5% per quarter)

or

is it sufficient to pay any one i.e higher of the above two conditions.

In CGST Act, 2017 ,it is clear if we pay higher of the both conditions.

Kindly provide your reply with analysis quoting circulars, clarifications , advance rulings if any.

AI Summary

Debate on CGST Act Section 18(6): Must Both Conditions Be Met for Capital Goods Tax and ITC Reversal? A discussion on the application of Section 18(6) of the CGST Act, 2017, and related rules, focused on whether both conditions-paying tax on transaction value and reversing input tax credit (ITC) for the remaining useful life of the asset-must be met upon the supply of capital goods. Participants debated if compliance with only the higher of the two conditions is sufficient. Some argued that paying taxes on the higher side, as calculated under Section 18(6) with Rules 40(2) or 44(6), is advisable to avoid disputes. Others emphasized that the law does not require double payment or ITC reversal. The discussion also touched on the implications of these provisions in situations like rental or destruction of capital goods.